Coal imports by Indian power plants are growing at the fastest rate in five years

Foreign reserves.
Foreign reserves.
Image: REUTERS/Amit Dave
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Indian power plants’ appetite for imported coal is on the rise again.

The country’s electricity generating firms are expected to import up to 74 million tonnes of the fossil fuel in the current financial year ending March 2020, according to India Ratings and Research. The Mumbai-based ratings firm released its mid-year power outlook yesterday (Sept. 17).

Coal imports to produce electricity have already risen by five million tonnes year-on-year in the April-July period, at the end of which they stood at a total 23 million tonnes. In the rest of the fiscal year, they are expected to increase by another 10-12 million tonnes over their previous levels, said Vivek Jain, director at India Ratings. This would result in an annual growth of over 19%, the highest in at least five years.

Though most power plants in India are state-owned, the biggest demand for imported coal comes from private ones.

The capacity utilisation of ultra-mega power plants, built in coastal states like Gujarat and calibrated for Indonesian coal, has sharply improved, the outlook says.

The plants had faced an uncertain future after a change in Indonesian government policy raised coal prices in 2010. Earlier this year, the Indian electricity regulator allowed Adani Power, whose 4.6 gigawatts plant in Mundra port town is the country’s second largest, to increase tariffs to meet the rise in its fuel costs. The move has signaled similar approvals for other such plants.

Low domestic production

Though weak sales of automobiles and consumer goods have impacted industrial demand for electricity, rapid electrification of rural households by the government has ensured that the overall demand for power remains healthy, the outlook said. In the April-July period, national electricity demand grew 6.7% year-on-year.

On the other hand, production has slowed down at the state-owned miner Coal India, which supplies almost all of the country’s domestic coal. A shortage in its output forces power plants to blend imported coal in their feedstock.

In the April-July period, Coal India’s production fell 1.1% year-on-year, hit by “weather, protests by employees in some mines, and delay in finalisation of overburden removal contracts,” the outlook said. Jain also pointed that Coal India tends to witness a slowdown after a high-growth phase such as the last financial year.